sebi:WTM/KMA/CFD/351/01/2011
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Facts / Headnote
Application for exemption rejected
Provisions invoked
- s. 19
Regulations
- Reg. 4(4)
- Reg. 11(1)
- Reg. 20(5)
- Reg. 4(6)
Holding
SEBI declined to grant the acquirers exemption from the applicability of Regulation 11(1) and 11(2) of the Takeover Regulations in respect of their proposed acquisition of 8,10,000 equity shares of Jainex Aamcol Limited through preferential allotment, and rejected their application dated December 16, 2009 read with January 11, 2010.
Full text
Page 2 of 10 preferential allotment by the target company. The application for exemption was filed inter alia on the ground that the target company’s financial health did not enable it to repay the unsecured loans extended by the acquirers and/or service the unsecured loans during the year ending March 31, 2009 and it was deemed prudent to the target company that the unsecured loans to the tune of `3.24 crores be converted into equity shares and allot the same on preferential basis to the acquirers. According to the said application, the shareholding/voting rights of the acquirers in the target company would increase from 45.75% to 74.92%, pursuant to the aforesaid acquisition.
Page 3 of 10 2010, when, Mr. Ronojoy Mazumdar, on behalf of the acquirers, appeared before me and made submissions. Written submissions dated June 2, 2010 was also submitted during the hearing. It was inter alia submitted that the acquirers had made the application considering the state of affairs of the target company as at March 31, 2009 and the projections for the financial year 2010. It was further submitted that, though the audited balance sheet as at March 31, 2009 was annexed to the application, the Takeover Panel has completely ignored to consider the same and instead, had considered the balance sheet as at March 31, 2008. According to the acquirers, the balance sheet as at March 31, 2008 was not at all relevant for considering their application. It was thus, the case of the acquirers that the recommendation and the conclusion arrived at by the Takeover Panel was not based on actual facts. Mr. Ronojoy Mazumdar further submitted that the present case is similar to that of Secur Industries Limited wherein, on the basis of the recommendation of the Takeover panel, SEBI had granted exemption to the acquirers therein from the applicability of the relevant provisions of the Takeover Regulations. Considering the contention that the Takeover Panel’s recommendation was not based on the relevant facts, SEBI vide an Order dated June 15, 2010, remanded back the application dated December 16, 2009 read with January 11, 2010 of the acquirers to the Takeover Panel for considering th
Page 4 of 10 the above that the financial health of the Company is expected to become better as per the projections given by the Applicant. The Panel did not find any material change in this regard even after considering the Target Company’s balance sheet for the year ending 31/3/2010. As regards the case of Secur Industries Ltd., the Panel observed that the facts of that case are not similar to the facts of this case and as such no analogy can be drawn between the two cases. The Panel therefore did not recommend any exemption to the acquirers and rejected their application for exemption from the applicability of provisions of regulation 11(1) and 11(2) of the Takeover Regulations.” (Underline supplied)
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Source: SecMarx — sebi:WTM/KMA/CFD/351/01/2011. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.